USD/JPY climbs back above mid-113.00s, reversing a major part of overnight slide

A combination of factors assisted USD/JPY to regain positive traction on Thursday.
Hawkish Fed expectations helped the USD to stall the post-US CPI corrective decline.
The risk-on impulse undermined the safe-haven JPY and exerted additional support.

Haresh Menghani FXStreet

The USD/JPY pair climbed back above mid-113.00s during the Asian session and reversed a major part of the previous day's profit-taking slide from multi-year tops.

The US dollar witnessed aggressive selling on Wednesday and erased its weekly gains to 13-month tops amid the post-US CPI slide in the longer-dated US Treasury bond yields. The headline US CPI for September rose 0.4% in September as against 0.3% anticipated and lifted the yearly rate to 5.4%, again beating expectations for a reading of 5.3%. Investors, however, seem aligned with the Fed's transitory inflation narrative, which, in turn, dragged the US bond yields lower.

Nevertheless, the US CPI report reaffirmed market expectations for a potential interest rate hike in 2022. Moreover, the minutes of the latest FOMC monetary policy meeting held in September showed that the US central bank remains on track to begin tapering its bond purchases later this year. Apart from this, a modest rebound in the US bond yields acted as a tailwind for the greenback and assisted the USD/JPY pair to regain some positive traction on Thursday.

On the other hand, a generally positive tone around the equity markets undermined the safe-haven Japanese yen and was seen as another factor that exerted additional support to the USD/JPY pair. The fundamental backdrop seems tilted firmly in favour of bullish trades and the emergence of fresh buying reaffirms the positive outlook. That said, overbought RSI on short-term charts warrants some caution before positioning for any further appreciating move, at least for now.

Market participants now look forward to the US economic docket, featuring the release of the Producer Price Index (PPI) and the usual Weekly Initial Jobless Claims data. This, along with the US bond yields, will influence the USD price dynamics. Traders might further take cues from the broader market risk sentiment for some short-term opportunities around the USD/JPY pair.

Technical levels to watch

USD/JPY

Overview
Today last price	113.5
Today Daily Change	0.25
Today Daily Change %	0.22
Today daily open	113.25

Trends
Daily SMA20	111.18
Daily SMA50	110.42
Daily SMA100	110.26
Daily SMA200	108.81

Levels
Previous Daily High	113.8
Previous Daily Low	113.23
Previous Weekly High	112.25
Previous Weekly Low	110.82
Previous Monthly High	112.08
Previous Monthly Low	109.11
Daily Fibonacci 38.2%	113.45
Daily Fibonacci 61.8%	113.58
Daily Pivot Point S1	113.05
Daily Pivot Point S2	112.85
Daily Pivot Point S3	112.48
Daily Pivot Point R1	113.63
Daily Pivot Point R2	114
Daily Pivot Point R3	114.2

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

GBP/USD retreats further, clinches three-day lows

The British Pound comes under extra selling pressure at the beginning of the week, dragging GBP/USD to fresh three-day troughs near 1.3350. Cable’s steady drop follows the improved tone in the Greenback as effervescence in the Middle East remains everything but abated.

EUR/USD remains offered below 1.1400

EUR/USD builds on Friday’s pullback and revisits the 1.1380 region, or multi-day lows, in quite a negative start to the week. The pair’s extra losses come in response to the marked bounce in the US Dollar, supported at the same time by unabated tensions in the Middle East. In the meantime, investors continue to gear up for the upcoming US CPI data and the semiannual testimony by Chair Warsh.

Gold breaches below $4,000, tests monthly lows

Gold remains under marked downside pressure on Monday, breaking below the key $4,000 hurdle per troy ounce to trade closer to monthly troughs. The precious metal’s retracement comes in response to the extra recovery in the US Dollar and rising concerns surrounding the US-Iran conflict.

Bitcoin vs Gold Outlook: Sell-off fears intensify as Middle East tensions escalate

Bitcoin (BTC) and Gold (XAU) remain under pressure at the time of writing on Monday. The Crypto King has slipped below $63,000, while XAU approaches the psychologically important $4,000 support level. The drawdowns indicate that risk-averse sentiment is dominant as investors continue to assess the impact of renewed geopolitical tensions in the Middle East.

The week ahead: Geopolitical risks rise, Warsh speaks to congress and earnings season gathers pace

It’s a shaky start to the week for financial markets. The oil price has risen by nearly 4% and Brent crude is trading above $79 per barrel. This comes after more attacks between the US and Iran in the Gulf, and statements from the Iranian regime that it has closed the Strait of Hormuz.

Five sessions, one round trip: Why the whipsaw is exactly what Warsh ordered

Markets opened July with a December hike as the base case and spent five trading sessions unlearning and relearning it. A 57K payrolls print bled the tightening bets out of the strip; a re-shut Strait of Hormuz is pushing them back in. Wednesday's minutes from the June FOMC meeting landed mid-round-trip, describing a world that had already stopped existing.